In 2013, Workers’ Share of Income in the Corporate Sector Fell to its Lowest Point since 1950

By many different measures, the U.S. labor market remains remarkably weak more than five years after the official recovery from the Great Recession. The figure below shows a particularly stark measure: the share of corporate sector income accounted for by workers’ wages and benefits. The corporate sector accounts for roughly 75 percent of private sector income, and this income goes to either employees or corporate owners. In the wake of the Great Recession, the share of this income captured by workers, instead of capital owners, hit its lowest point since 1950, falling to 72.7 percent in 2013.

Labor’s share of corporate sector income seemed to be trending downward for at least a decade before the Great Recession hit, but after a brief surge in 2008—a surge that occurred only because the financial crisis of 2008 caused corporate profits to plummet even faster than wages and employment for several months—it declined more rapidly.

Has the decline of labor’s income share stopped in 2014? It’s actually not entirely clear. While it rose sharply in the first quarter of 2014, this was due largely to a decline in corporate profits caused by the expiration of a tax credit passed as part of the 2012 American Taxpayer Relief Act of 2012 that allowed firms to accelerate the amount of depreciation of capital equipment they claimed. In essence this drop in profits (and resulting increase in labor’s income share) was just an accounting illusion, rather than an actual rebound of labor income. And since this measure of wages and benefits includes the pay of really high-wage workers—like CEOs—it will likely pick up well before wages for the vast majority of American workers do. But this debate over whether we’ve reached absolute rock-bottom shouldn’t distract from the main point: Even if the outright decline in labor’s income share (that includes high-wage workers like CEOs) finally stops in 2014, the graph shows clearly that there is a long way to go before the share of corporate-sector income going to workers reaches historic norms. And it will be even longer before wages at the bottom and middle start growing at a satisfactory pace again.

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EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. EPI’s research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans.